Global Impact of COVID-19 on Economy

As business tycoons struggle to recover from recent financial shocks, both ubiquitous and unique in nature, multitudinous dynamics have commenced to shift and evolve. White collar individuals have resorted to working remotely whereas blue collar workers have fallen prey to surging unemployment. Business enterprises are encouraging employees to evolve in a monochrome world. Global economies can’t just afford to subject the cogs and gears of the industrial machine to idle hood. Currency devaluation and economic recessions impose intimidating threats.

The impending doom of minimal petroleum products cascades over our heads. In 2017 Pakistan imported $55.6B, making it the 47th largest importer in the world. The most recent imports are led by refined petroleum which represent 12.6% of total imports of Pakistan, followed by crude petroleum, which account for 5.17%.1 The aforementioned homeland has experienced a sharp decline in the respective prices of high speed diesel and other fossil fuels in the last months. However, local refineries are extremely likely to shut down if cheaper imports continue to escalate. Oil refineries have informed the government that they have faced inventory losses worth Rs31 billion in March and April following lockdowns that shook global oil markets.2

Similarly, numerous knitting units have ceased production. in 2017 Pakistan exported $24.8B, making it the 68th largest exporter in the world. The most recent exports are led by house linens which represent 13.4% of total exports of Pakistan, followed by non-knit men’s suits, which account for 7.65%.3 However, the aforementioned country has experienced a sharp decline in the respective exports of woven cloth and other textiles. More than one million textile workers are set to lose jobs in Pakistan because of declining global orders amid the coronavirus crisis, according to a study.4

As Pakistan braces itself for an economic demise, global financial markets follow a similar path. The displacement of outputs is likely to cause significant structural damage. Growth rebounds serve as idealistic fairy tales for capitalist countries like U.S. and Britain. Although communist countries like Russia and China continue to struggle, their inability to maintain lockdown through necessary means of force has yielded multiplying cases of COVID-19. Numerous local business enterprises have resorted to distinguished means of rebellion against quarantine. Mismanagement of resources has compelled abundant governments to bow before ultimatums offered by private businesses, thus giving birth to troubles for the health sector.

Moreover, recessions act as primarily cyclical events. Combined with extreme exogenous demand and supply shocks, abundant economies are susceptible to fall prey to contraction. It can tighten the noose of financial conditions and credit intermediation.5 It can choke off expansion as well as tarnish standards of living. Mercantilism is less likely to thrive, now more than ever. The prospect of maintaining a trade surplus serves as an optimistic dream as factory units continue to shut down across homelands. Protectionism no longer serves self-interest of free- market economies like Japan.

It is impossible to completely rely on the natural resources within the peripheries amidst globalization. As Donald Trump accuses China of being responsible for the calamity wrought upon by COVID-19, Europe threatens to cut off deep trade and investment ties with Beijing.6 This would have a significant impact on cross border trade liberalization. The manifestation of trade barriers, embargoes and tariffs can lead to an unprecedented level of economic integration. It can hinder development of services that support international business e.g. research and development centres. Consumer demand would not be satisfied and cognitive dissonance would alleviate as a result, now more than ever.

With the political environment no longer facilitating business enterprises, a decrease in global competition is to be expected. Minimal strategic resource seeking would lead to loss of innovation and experience as dextrous workers begin to be devoid of training workshops. International rules would no longer be implemented on a macro level. It would give birth to piracy, child labour and other illegal deeds. Ethical dilemmas are likely to be encountered with corruption and obliteration of human rights with no one left to enforce them. Business ethics are likely to be ignored regarding commercial transactions as business enterprises continue to engage consumers in order to minimise inventory loss.

Although emission of greenhouse gases has decreased significantly following the spread of COVID-19, it is not to say that it might last for long. The carbon footprint of residents within concrete forests has declined in homelands practicing quarantine. Environmental pollution in the form of air pollution and noise pollution has decreased considerably. Emission of CFCs (chlorofluorocarbons) and toxic compounds like SO2 (sulphur dioxide) has experienced a sharp decrease as lead factories, outpost factories and offshore factories remain subject to idle hood. Necessities like whole grain cereal serving universal needs continue to be in demand whereas luxuries like ostentatious automobiles suffer minimised demand.7

Supply chains and manufacturing operations have been disrupted on a global scale. The high tech industry is no longer what it once was. A considerable fall in demand in Chinese market as well as a constrained supply of iPhones has led Apple to the conclusion that its quarterly earnings might be lower than expected.8 This means that numerous organizations will be making use of just-in-time inventories in order to reduce their risks.

Although it would leave them devoid of buffer stocks, it would yield major cost savings from reduced warehousing and inventory holding costs. Similarly, following absenteeism and high employee turnover rates, companies are likely to cut back on their hidden costs regarding foreign production locations. Governments are much likely to prefer exclusive distribution over selective distribution and intensive distribution. This is because any homelands affected by COVID-19 would be aiming for a smaller of channel resellers within a specific geographical location in order to promote isolation and social distancing.

It must be noted that while regimes can’t make any compromise on the productivity of primary sector, they can certainly deal with the secondary sector and the tertiary sector in an organized manner. Pakistan, being an agriculture based economy, can thrive in the upcoming scenario if it maintains said standards of sanitation and cleanliness. Intangible currency like cryptocurrency is likely to substitute tangible wealth like coins etc. It might put money mints and printing machines permanently out of business as people seek ways of eradicating COVID-19. It would re-introduce virtual stock markets, encouraging people to invest, without suffering substantial losses, now more than ever.

Streaming services like Netflix have picked up nearly 16 million global subscribers during the first three months of the year.9 People are likely to invest time and resources in E-sports rather than Grand Prix and World Olympics etc. Similarly, patterns of virtual classrooms being established across the world might encourage students to opt for free online courses. This would not only manifest a high literacy rate, although only for the digitally literate, it would also deal a swift blow to education institutes and universities worldwide. The probability of people paying substantial amounts for online classrooms is extremely low.

The food industry is already coming up with innovative ways of marketing their gourmet meals. Restaurants have suffered just as much of a negative impact as the tourism industry. This has compelled them to operate on micro levels instead of franchises. Wholly owned subsidiaries appear as repulsive prospects as the notion of establishing overseas operations has become risky in the current political environment. By assuring health quality through biodegradable packaging etc., and by offering additional discounts, they are struggling to maintain their grasp on their audience in their respective geographical zones. It has led to a demand for digital chatbots as much as delivery services. Automated operations have an increasing probability of substituting manual labour.

Governments have an increasing probability of investing their time and resources in the health sector. The demand of remedial staff is to increase in terms of offered intangible services just as the demand of mechanical equipment is to increase in terms of tangible products. Regimes have a great probability of preferring local responsiveness over global integration. It would maximize the need for configuration and adapting coordination.

In retrospect, COVID-19 has the potential to yield more challenges than opportunities. It may be rewarding for the bourgeoisie but it is certainly harmful for the proletariat. From a Marxist’s perspective, bed and breakfast is not a distant reality. Malnourishment might follow soup stalls if commoners are not innovative in in their approaches towards seeking employment. What the Vox Populi fails to realize is that COVID-19 demands evolution, not idle hood. The notion of earning by the sweat of one’s brow is very much pragmatic.

Sales can be accomplished through a keen understanding of demographics and surveys just as advertisements can be achieved through web designs comprising of web candy. Regimes need to prioritize global integration over baseless accusations and self-interest. The survival of one nation is heavily dependent on other because of our ever growing interdependence. According to the transaction cost analysis, opportunistic behaviour combined with bounded rationality has potential to obliterate international business on a gargantuan magnitude.


1 3